The smart strategy of this magnificent dividend stock continues to pay big dividends

Procurement is an essential aspect of Brookfield Renewable’s (BEPC 0.79%) (BEP 1.39%) growth strategy. The company’s ability to make positive trades has helped give it the power to increase its dividend. He’s done a magnificent job over the years, growing his payout at a 6% compound annual rate over the past 20 years.

However, buying assets is only one aspect of Brookfield’s strategy. It also routinely sells investments to recycle that capital in new opportunities with higher returns. This smart strategy has helped boost its growth rate over the years.

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Brookfield Renewable and its partners achieved asset sales of more than $400 million in the first half of this year ($250 million net to Brookfield). These sales yielded a profit of twice the invested capital. Meanwhile, they helped increase the company’s liquidity. It ended the second quarter with $4.4 billion of available liquidity on its balance sheet. This gives it additional financial flexibility to make increased purchases as opportunities arise.

The renewable energy company recently disclosed two more capital recycling deals. In the first venture, Brookfield Renewable, its parent company Brookfield Asset Managementand their institutional partners have agreed to sell their 25% stake in First Hydro Company to global investment group CDPQ. First Hydro is a critical electricity generation and storage company in United Kingdom, where is it a leader in pumped hydro storage. The sale will allow Brookfield Renewable to cash out on its minority interest in that company.

The second deal will see Brookfield Renewable and its institutional partners sell Saeta to Masdar, a clean energy company owned by the United Arab Emirates, for $1.4 billion. Brookfield acquired the company in 2018 through its investment in Terraform Power. Brookfield helped Saeta develop its operations in Spain and Portugal. This sale is part of the company’s asset rotation strategy to recycle capital to fund new growth initiatives.

Quick return of capital to WORK

These sales will help Brookfield achieve its goal of generating approximately $3 billion in total revenue this year, with $1.3 billion net to Brookfield. This will further increase its liquidity to support its investment strategy.

Brookfield redistributes capital almost as quickly as it comes in the door. The company, parent and an institutional partner have agreed to buy a majority stake in the French renewable energy company. Neocene at a $6.7 billion valuation in May. They plan to close the acquisition with a majority interest of 53% and then offer to acquire the rest of the company from its other shareholders. Brookfield Renewable expects to invest approximately $540 million in the venture.

Neoen is a highly strategic acquisition for Brookfield. Its three main markets — France, Australia and the Nordics — are some of the fastest growing renewables markets with strong corporate demand. This will put Brookfield in an even better position to support corporate power buyers such as megacap technology companies. These companies need an enormous amount of electricity to support their cloud data center development and you applications. The company recently signed the largest power purchase agreement with Microsoft to help support its growth in US and Europe.

Brookfield Renewable has also enhanced its growth capabilities in other key global renewable energy markets. For example, the company and its partners acquired Leap Green, the leader wind energy-company focused in India, for $200 million, with $40 million net to Brookfield. With this understanding, he now operates one of the THE the largest renewable energy businesses in India.

The company and its partners also recently they made their first investment in South Korea. They agreed to invest up to $500 million — $100 million net to Brookfield Renewable — in Hanmaeum Energy to acquire and expand that company’s operations.

Supercharging its growth

Brookfield Renewable’s organic growth drivers (inflation driven rate increases, margin improvement activities and development projects) should fuel between 7% and 12% annually. funds from operations (FFO) per share through 2028. The company believes its capital recycling strategy can help drive FFO growth above 10% annually, so it should have enough strength to meet its dividend growth plan , which yields 4.5%, through 5% to 9% annually. Add that revenue to the growth rate, and Brookfield could produce total profits in the mid-teens. That makes it look like a fantastic stock to buy and hold for the long term.